Helen Lopez Languirand and L. Lopez's Sons, Inc. Versus John Magruder Lopez, Shawn L. Lopez, and John Michael Lopez ( 2020 )

HELEN LOPEZ LANGUIRAND AND L. NO. 19-CA-559
LOPEZ'S SONS, INC.
FIFTH CIRCUIT
VERSUS
COURT OF APPEAL
JOHN MAGRUDER LOPEZ, SHAWN L.
LOPEZ, AND JOHN MICHAEL LOPEZ STATE OF LOUISIANA
ON APPEAL FROM THE TWENTY-FOURTH JUDICIAL DISTRICT COURT
PARISH OF JEFFERSON, STATE OF LOUISIANA
NO. 778-739, DIVISION "K"
HONORABLE ELLEN SHIRER KOVACH, JUDGE PRESIDING
May 27, 2020
MARC E. JOHNSON
JUDGE
Panel composed of Judges Susan M. Chehardy,
Fredericka Homberg Wicker, and Marc E. Johnson
AFFIRMED
MEJ
SMC
FHW
COUNSEL FOR PLAINTIFF/APPELLEE,
HELEN LOPEZ LANGUIRAND
James F. Willeford
Reagan L. Toledano
COUNSEL FOR DEFENDANT/APPELLANT,
JOHN MAGRUDER LOPEZ, SHAWN L. LOPEZ, JOHN MICHAEL LOPEZ,
AND L. LOPEZ'S SONS, INC.
George I. Pivach, II
Timothy Thriffiley
JOHNSON, J.
Appellants/Defendants, John Magruder Lopez, Shawn M. Lopez, John
Michael Lopez, and L. Lopez’s Sons, Inc., appeal the partial summary judgment
rendered from the 24th Judicial District Court, Division “K”, in favor of
Appellee/Plaintiff, Helen Lopez Languirand, concerning the preemptive rights to
purchase shares of a corporation. Ms. Languirand answered the appeal, seeking
amendment of the judgment. For the following reasons, we affirm the partial
summary judgment of the trial court and deny Ms. Languirand’s request to amend
the judgment.
FACTS AND PROCEDURAL HISTORY
This is the second appeal for this matter. L. Lopez’s Sons, Inc. (hereinafter
referred to as “the corporation”) is a family-owned corporation that was
incorporated on May 10, 1950. It was started by John B. Lopez, Florian S. Lopez,
Eurilda Lopez, and Florian Seal. The articles of incorporation created on May 1,
1950 included a provision in Article X that shareholders could not transfer or
assign any shares held by them without first offering the shares to the board of
directors to purchase. However, no other reference to a shareholder’s preemptive
right to shares was mentioned.
Over the years, the corporation’s articles of incorporation had been revoked
and reinstated twice by the Louisiana Secretary of State. The corporation’s articles
of incorporation were amended and restated on December 23, 2013 by the
shareholders and directors. Specific articles of the original articles of
incorporation were deleted or revised and substituted with newer articles. The new
Article VI authorized 2,000 common shares of the corporation and the issuance of
1,000 shares from the treasury. No provision in the amended and restated articles
referenced shareholder’s preemptive rights. The corporation was last reinstated by
the Louisiana Secretary of State on December 27, 2013.
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Ms. Languirand and defendants, John Magruder Lopez (hereinafter referred
to as “John”), Shawn M. Lopez (hereinafter referred to as “Shawn”), and John
Michael Lopez (hereinafter referred to as “John Michael”), are shareholders of the
corporation. Defendants, John, Shawn and John Michael, were selected as the
members of the board of directors on January 29, 2017; however, Ms. Languirand
was not present at that meeting of the shareholders. On April 7, 2017, Defendants
held a board meeting and passed a resolution that sold 176 treasury shares to
Shawn at the price of $205/share, totaling $36,080. An additional resolution sold
John Michael 24 treasury shares at the price of $205/share, totaling $4,920. On
December 15, 2017, Ms. Languirand filed an action against Defendants—in her
capacity as a shareholder and on behalf of the corporation—that sought to have the
January 2017 election of the directors and officers for the corporation declared null
and void and to have the April 2017 sale and transfer of the treasury shares
declared null and void.
In Lopez Languirand v. Lopez, 18-245, (La. App. 5 Cir. 12/12/18); 261,
So.3d 1054, this Court reviewed the trial court’s judgment that sustained
Defendants’ exceptions of no right of action, no cause of action, prematurity, and
improper cumulation of parties and dismissed all of the asserted claims with
prejudice. The judgment was reversed in part on the exception of prematurity as it
related to Ms. Languirand’s direct action claim for violation of her preemptive
rights. The portion of the judgment that dismissed Ms. Languirand’s claim for
violation of her preemptive rights was also reversed, and the judgment was
amended to allow Ms. Languirand time to amend her petition to allege a valid
cause of action. The other rulings of the trial court were affirmed.1
Upon remand, Ms. Languirand filed an “Amended and Restated Petition” on
December 27, 2018. In her amended petition, Ms. Languirand sought the
1
See, Lopez Languirand, supra, for the underlying facts of that appeal.
19-CA-559 2
declaration that the resolutions for the election of directors and officers, and the
actions taken by Defendants on January 28 and 30, 2017, be declared null and
void. In the alternative, she sought enforcement of her preemptive rights to the
corporation’s shares under La. R.S. 12:1-630 by being allowed to purchase her
proportionate shares of the treasury stock to maintain a controlling interest in the
corporation.
On March 29, 2019, Ms. Languirand filed a “Motion for Summary
Judgment” to enforce her shareholder preemptive rights. She alleged that, pursuant
to La. R.S. 12:1-630, the shareholders had preemptive rights to purchase
proportionate shares of the treasury stock offered for sale because the corporation
was incorporated prior to January 1, 1969. Ms. Languirand asserted she was
entitled to summary judgment that voided the sale of the treasury shares to Shawn
and John Michael or, in the alternative, offered proportionate shares to her and the
other shareholders according to law.
In their opposition to the motion for summary judgment, Defendants argued
that the shareholders did not have any preemptive rights to the additional 1,000
authorized shares created in the amended and restated articles of incorporation.
They contended those shares were created for a potential claim by Henry Regus, a
former secretary and bookkeeper for the corporation, to shares in the corporation.
They further contended there was no contemplation by the shareholders that they
would have the ability to purchase those shares from the corporation before they
would be transferred to Mr. Regus. Defendants also argued that, although the
corporation was incorporated in 1950, the amended and restated articles were
adopted after 1969, and Ms. Languirand does not enjoy preemptive rights under
La. R.S. 12:1-630.
The hearing on Ms. Languirand’s motion was held on August 21, 2019. In a
judgment rendered on September 11, 2019, the trial court granted Ms.
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Languirand’s motion for summary judgment in part. The court found that Ms.
Languirand holds preemptive rights under La. R.S. 12:1-630(A); the corporation
failed to give her the required notice and reasonable time to exercise those rights as
required by La. R.S. 12:1-630(B)(1); and, she is entitled to acquire her
proportionate amount of shares issued by the corporation. In its “Reasons for
Judgment,” the court held that, if the shareholders did not desire to hold
preemptive rights, the amended articles of incorporation were required to “opt
out,” as required by the statute.
The trial court then denied Ms. Languirand’s motion insofar as it sought to
nullify the treasury shares sold to Shawn and John Michael pursuant to La. R.S.
12:1-304. The court reasoned that Ms. Languirand did not meet her burden for
summary judgment to void the sale of the treasury shares to Shawn and John
Michael under La. R.S. 12:1-304(C), and she failed to establish that nullifying the
sale was an equitable remedy. The trial court certified the partial summary
judgment as a final, appealable judgment on September 13, 2019. The instant
suspensive appeal of Defendants followed.
ASSIGNMENTS OF ERROR
On appeal, Defendants allege that: 1) the trial court erred in granting partial
summary judgment in favor of Ms. Languirand because there were genuine issues
of material fact remaining; 2) the trial court was manifestly erroneous in finding
that Ms. Languirand, as a shareholder of the corporation, has preemptive rights to
purchase her proportionate share of treasury shares in the corporation; 3) the trial
court was manifestly erroneous in determining that Ms. Languirand timely
exercised any preemptive rights she may have; and, 4) the trial court was
manifestly erroneous by allowing Ms. Languirand to acquire her proportionate
19-CA-559 4
amount of shares in the corporation.
LAW AND ANALYSIS
General Summary Judgment Law
The summary judgment procedure is designed to secure the just, speedy, and
inexpensive determination of every action and is favored. La. C.C.P. art.
966(A)(2). Appellate courts review summary judgments de novo under the same
criteria that govern the trial court’s consideration of whether summary judgment is
appropriate. Stogner v. Ochsner Clinic Foundation, 18-96 (La. App. 5 Cir.
9/19/18); 254 So.3d 1254, 1257, citing Batiste v. United Fire & Casualty Co., 17-
485 (La. App. 5 Cir. 3/14/18); 241 So.3d 491, 496. Summary judgment shall be
granted “if the motion, memorandum, and supporting documents shows that there
is no genuine issue as to material fact and that the mover is entitled to judgment as
a matter of law.” Id., quoting La. C.C.P. art. 966(A)(3).
A material fact is one that potentially insures or prevents recovery, affects a
litigant’s ultimate success, or determines the outcome of the lawsuit. Populis v.
State Department of Transportation and Development, 16-655 (La. App. 5 Cir.
5/31/17); 222 So.3d 975, 980, quoting Pouncy v. Winn-Dixie La., Inc., 15-189 (La.
App. 5 Cir. 10/28/15); 178 So.3d 603, 605. An issue is genuine if it is such that
reasonable persons could disagree. If only one conclusion could be reached by
reasonable persons, summary judgment is appropriate as there is no need for trial
on that issue. Id. Whether a particular fact in dispute is material for purposes of
summary judgment can only be determined in light of the substantive law
applicable to the case. Stogner, 254 So.3d at 1257, citing Jackson v. City of New
Orleans, 12-2742 (La. 1/28/14); 144 So.3d 876, 882, cert. denied, --- U.S ----, 135
S.Ct. 197, 190 L.Ed.2d 130 (2014).
The party moving for summary judgment bears the burden of proof.
Stogner, supra, citing La. C.C.P. art. 966(D)(1). However, if the mover will not
19-CA-559 5
bear the burden of proof at trial, the moving party must only point out that there is
an absence of factual support for one or more elements essential to the adverse
party’s claims. Id. Thereafter, the burden shifts to the adverse party to produce
factual support sufficient to establish that he will be able to satisfy his evidentiary
burden of proof at trial. Id. If the adverse party fails to meet this burden, there is
no genuine issue of material fact, and the mover is entitled to summary judgment
as a matter of law. Id. Once the motion for summary judgment has been properly
supported by the moving party, the failure of the adverse party to produce evidence
of a material factual dispute mandates the granting of the motion. Id., citing Babin
v. Winn Dixie La., Inc., 00-78 (La. 6/30/00); 764 So.2d 37, 40.
Granting of Partial Summary Judgment and Preemptive Rights2
Defendants allege the trial court erred in granting partial summary judgment
in favor of Ms. Languirand. They argue that genuine issues of material fact remain
concerning whether the shareholders of the corporation have preemptive rights to
the treasury shares. They contend that the shareholders of the corporation made a
conscious decision in 2013 to create entirely new articles of incorporation; and, if
the shareholders and directors wanted to provide for preemptive rights, they could
have done so by placing such a statement in the amended and restated articles of
incorporation. Defendants further argue that this Court should look to the intent of
the shareholders in the adoption of the completely new articles of incorporation,
rather than apply La. R.S. 12:1-630, as the affidavit of John Lopez shows that the
shareholders did not contemplate the allowance of preemptive rights with respect
to the 1,000 authorized treasury shares of stock. Defendants contend that, instead,
the 1,000 treasury shares were intended to be reserved for Mr. Regus. As a result,
Defendants assert that these issues of fact preclude the granting of a partial
summary judgment on Ms. Languirand’s preemptive rights to the shares of stock at
2
The first two assignments of error will be jointly discussed because they are interrelated.
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issue.
Ms. Languirand maintains that, because the corporation was incorporated
prior to January 1, 1969, the articles of incorporation are deemed to include
preemptive rights for the shareholders pursuant to La. R.S. 12:1-630. She argues
that the revocation of the charter and reinstatement and adoption of restated articles
do not change the date of incorporation because the corporation never ceased to
exist. She notes the restated articles of incorporation state that the corporation was
reinstated retroactively, as if the corporation had never been terminated. Because
the articles and bylaws are silent on the subject of preemptive rights, she avers the
restated articles are presumed to include the provision for shareholder preemptive
rights as a matter of law.
Ms. Languirand further maintains that the August 23, 2013 corporate
resolution expressly stated that the 1,000 common shares were unissued shares to
be held as treasury shares; and, there was no evidence supporting Defendants’
argument that the 1,000 shares were reserved for and/or offered to Mr. Regus or
that the 1,000 shares were issued prior to the sale to Shawn and John Michael. She
argues that whether Shawn or any other shareholder intended for the corporation to
exclude shareholder preemptive rights is not “material” for summary judgment
purposes because the provisions of the articles of incorporation and La. R.S. 12:1-
630(A) control whether the shareholders have preemptive rights.
La. R.S. 12:1-630 provides, in pertinent part:
A. The shareholders of a corporation do not have a preemptive right to
acquire the corporation’s unissued shares except to the extent the
articles of incorporation so provide. The articles of incorporation of
a corporation that was incorporated before January 1, 1969, shall be
deemed to contain a statement that “the corporation elects to have
preemptive rights,” unless the articles of incorporation contain a
specific provision enlarging, limiting, or denying preemptive rights.
B. A statement included in the articles of incorporation that “the
corporation elects to have preemptive rights”, or words of similar
import, means that the following principles apply except to the extent
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the articles of incorporation expressly provide otherwise:
(1) The shareholders of the corporation have a preemptive right, granted
on uniform terms and conditions prescribed by the board of directors
to provide a fair and reasonable opportunity to exercise the right, to
acquire proportional amounts of the corporation’s unissued shares
upon the decision of the board of directors to issue them.
Shareholders have a fair and reasonable opportunity to exercise the
right to acquire shares if they are given at least forty-five days to
purchase the shares after notice to them of that right, but shorter
periods of time may be fair and reasonable under the circumstances in
which the shares are being issued.
(Emphasis added).
In the instant matter, the corporation was incorporated in 1950. The
articles of incorporation filed with the Louisiana Secretary of State at that time did
not contain a specific provision enlarging, limiting, or denying preemptive rights of
the shareholders. Thus, because of the corporation was incorporated prior to
January 1, 1969 and there was no specific reference to preemptive shareholder’s
rights in the articles of incorporation, the original articles of incorporation were
deemed to contain the statement that “the corporation elects to have preemptive
rights” pursuant to La. R.S. 12:1-630(A). The amended and restated articles of
incorporation do not contain any specific provision enlarging, limiting, or denying
the preemptive right of the shareholders that were deemed to be contained in the
original articles of incorporation. Furthermore, the changes to the articles of
incorporation in 2013 did not change the incorporation date of the corporation;
thus, the intent of the shareholders in the drafting of the amended articles of
incorporation is inconsequential to the applicability La. R.S. 12:1-630(A).
Accordingly, we find that La. R.S. 12:1-630 applies to the amended and
restated articles of incorporation for the corporation, and the articles are deemed to
contain preemptive rights because there was no specific provision stating
otherwise.3
3
The Comment (a) for La. R.S. 12:1-630 explains the preemptive rights inclusion by stating:
19-CA-559 8
Time Period to Exercise Preemptive Rights
Defendants allege the trial court committed manifest error in determining
that Ms. Languirand timely exercised any preemptive rights that may have existed.
They argue that the sale of the treasury shares to Shawn and John Michael
occurred in April 2017, and Ms. Languirand was aware of the sale by September
2017, which was evident from her September 21, 2017 letter.4 They contend Ms.
Languirand only objected to the sale of the shares and made no attempt to exercise
her purported preemptive rights until March 26, 2018, when her attorney sent a
letter demanding her right to purchase the treasury shares. Thus, Defendants assert
that Ms. Languirand’s 45-day period to exercise or demand to exercise her
purported preemptive rights expired well before she made any demand to purchase
the treasury shares purchased by Shawn and John Michael.
Ms. Languirand maintains that she could not waive her preemptive rights
because the directors never gave her notice of her preemptive rights and the right
to purchase the treasury shares prior to their sale. She contends that the only
restriction on her exercise of her preemptive rights is found in La. R.S. 12:1-
630(D), which requires that an action to enforce preemptive rights be filed within
one year from the sale of the shares. Since the sale at issue occurred on April 7,
Before January 1, 1969, the effective date of the 1968 business corporation law,
Louisiana provided an “opt out” form of preemptive rights; the earlier corporation statute
supplied preemptive rights automatically unless a corporation’s articles of incorporation
provided otherwise. The 1968 statute reversed the rule, and made preemptive rights “opt
in;” shareholders did not have preemptive rights unless the articles affirmatively
approved them. To prevent the change in the default rule from eliminating preemptive
rights in corporations whose articles were silent on the subject, the 1968 statute contained
a provision that deemed the articles of pre-1969 corporations to contain a statement
approving of preemptive rights, except to the extent that the articles actually enlarged,
limited or denied those rights. Because this section retains the opt-in approach of the
1968 statute, and the Model Act, some pre-1969 corporations may still need the statutory
transition rule that was provided in the 1968 statute. That rule has been added to
Subsection A of this Section. (Internal citations omitted).
4
In her September 21, 2017 letter, Ms. Languirand questioned the purpose of sale of the treasury
shares to Shawn and John Michael and the price of the shares. She stated,
I would like to know why these shares were not offered to all the shareholders. It is my
understanding that under Louisiana law[,] the company must first offer the sale of the
company[-]owned shares to all of the stockholders. I did not receive notice of the intent
to sell the shares, and I object to the sale.
19-CA-559 9
2017, and the petition seeking enforcement of the preemptive rights was filed on
December 15, 2017, Ms. Languirand avers that she did not waive her preemptive
rights, and the claim is not prescribed.
In reference to the time limitations for enforcing preemptive rights claims,
La. R.S. 12:1-630(D) states,
On or after January 1, 2016, no action to enforce a preemptive right of
a shareholder shall be brought unless filed in a court of competent
jurisdiction and proper venue within one year of the date of the
issuance of the share to which the shareholder had the preemptive
right, or within one year of the date that the issuance of the share is
discovered or should have been discovered. Such an action is
perempted three years after the date of the issuance of the share.
Here, the sale of the treasury shares to Shawn and John Michael occurred on
April 7, 2017. Although Defendants’ claim that Ms. Languirand failed to assert
her preemptive rights prior to March 28, 2018, that assertion is false. Ms.
Languirand filed her petition asserting her preemptive rights on December 12,
2017.5 She filed her action within one year of the sale to Shawn and John
Michael. Therefore, we find that Ms. Languirand timely asserted her preemptive
rights to the 1,000 treasury shares.
Furthermore, as previously mentioned, La. R.S. 12:1-630(B)(1) provides that
shareholders have a fair and reasonable opportunity to exercise the right to acquire
shares if they are given, at least, 45 days to purchase the shares after notice to them
of that right, but shorter periods of time may be fair and reasonable under the
circumstances in which the shares are being issued. In this case, there was no
evidence presented that the other shareholders were given the required 45-day
notice of the board of director’s decision to issue any of the 1,000 treasury shares.
Even though Ms. Languirand obtained knowledge of the sale of the treasury shares
to Shawn and John Michael after the sale occurred, her knowledge of the event
5
Ms. Languirand specifically alleged she, as a shareholder of the corporation, has a preemptive
right to acquire the corporation’s unissued shares because the corporation was incorporated prior to
January 1, 1969.
19-CA-559 10
does not alleviate the board of director’s statutory requirement to give the
shareholders a fair and reasonable opportunity to exercise their preemptive rights.
Consequently, we find that the 45-day time period for Ms. Languirand to exercise
her preemptive rights to the treasury shares never commenced to run against her
claims.
Acquisition of Proportionate Amount of Shares and Answer to Appeal
Defendants allege the trial court was manifestly erroneous in allowing Ms.
Languirand to acquire her proportionate amount of shares issued by the
corporation. They argue that if Ms. Languirand is entitled to exercise any
preemptive rights, then a reading of La. R.S. 12:1-630(B)(1) limits her acquisition
to her proportionate shares of unissued shares from the corporation, and she is not
entitled to acquire any of the shares issued to Shawn and/or John Michael.
Defendants request that the trial court’s judgment be modified to clarify Ms.
Languirand’s entitlement pursuant to her purported preemptive rights.
Ms. Languirand also alleges the trial court erred in ordering that she be
allowed to acquire her proportionate amount of shares issued by the corporation.
She asserts that the trial court should have granted her requested remedy and
voided the corporation’s sale of the treasury shares to Shawn and John Michael
because the sale breached a fiduciary duty and constituted an ultra vires act. In the
alternative, Ms. Languirand asserts that the trial court should have ordered Shawn
and John Michael to offer and, if accepted, sell to the shareholders of the
corporation the proportionate percentage of shares that should have been offered in
advance of the sale of the treasury shares.
At this juncture in the proceeding, we find that it would be inappropriate to
grant either of the parties’ requests to amend the judgment. While La. R.S. 12:1-
630 allows for a shareholder to acquire proportional amounts of the corporation’s
unissued shares, there is still a genuine issue of material fact as to how many of the
19-CA-559 11
corporation’s 1,000 treasury shares should be considered “unissued.” La. R.S.
12:1-304 allows a shareholder to challenge a corporation’s power to act in an
action against the corporation. In a shareholder’s proceeding to enjoin an
unauthorized corporate act, the court may enjoin or set aside the act, if equitable.
We find that the trial court is not only limited to allowing Ms. Languirand acquire
to her proportionate shares of unissued treasury shares currently available, and the
court has the option of nullifying the sales to Shawn and John Michael after a trial
on the merits and awarding Ms. Languirand her proportionate amount from the
1,000 treasury shares. Accordingly, we deny the requests of the parties to amend
the judgment.
DECREE
Upon de novo review, we find that Ms. Languirand is entitled to partial
summary judgment finding that she is entitled to preemptive rights pursuant to La.
R.S. 12:1-630(A). For the foregoing reasons, we affirm the trial court’s judgment
that found Ms. Languirand holds preemptive rights; the corporation failed to give
her the required notice and reasonable time to exercise these rights as required by
La. R.S. 12:1-630(B)(1); and, she is entitled to acquire her proportionate amount of
shares issued by L. Lopez’s Sons, Inc. Defendants are assessed the costs of this
appeal.
AFFIRMED
19-CA-559 12
SUSAN M. CHEHARDY CURTIS B. PURSELL
CHIEF JUDGE CLERK OF COURT
MARY E. LEGNON
FREDERICKA H. WICKER
CHIEF DEPUTY CLERK
JUDE G. GRAVOIS
MARC E. JOHNSON
ROBERT A. CHAISSON SUSAN BUCHHOLZ
STEPHEN J. WINDHORST
FIRST DEPUTY CLERK
HANS J. LILJEBERG
JOHN J. MOLAISON, JR. FIFTH CIRCUIT
MELISSA C. LEDET
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19-CA-559
E-NOTIFIED
24TH JUDICIAL DISTRICT COURT (CLERK)
HONORABLE ELLEN SHIRER KOVACH (DISTRICT JUDGE)
JAMES F. WILLEFORD (APPELLEE) NICHOLAS A. HOLTON (APPELLEE) TIMOTHY THRIFFILEY (APPELLANT)
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